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Air France KLM reaches pensions deal with KLM staff

By Sudip Kar-Gupta
FILE PHOTO - A KLM commercial passenger jet takes off in Colomiers near Toulouse, France, October 19, 2017. REUTERS/Regis Duvignau

By Sudip Kar-Gupta

PARIS (Reuters) - Air France KLM <AIRF.PA> has struck a deal with its KLM pilot and cabin staff unions to resolve a dispute over pensions, the airline said on Monday, adding it would take a charge of 311 million euros ($366 million) in the third quarter as a result.

It will change to a defined contribution scheme from a final salary pension scheme and KLM will make a one-off lump sum payment of 194 million euros to the pension fund, Air France KLM said.

KLM pilots threatened legal action in 2016 if their demands for pension rises were not met.

The changes follow similar moves by other airlines, for whom pension scheme arrangements have been a source of tension with employees.

Lufthansa <LHAG.DE> and its main pilots union signed a wide-ranging agreement on pay, pensions and conditions this month.

In September British Airways <ICAG.L> proposed the closure of a large pension scheme, angering trade unions representing workers who have taken industrial action this year in a continuing pay dispute.

Air France KLM shares rose 1 percent in early trading, making the stock one of the top performers on Paris' SBF-120 index <.SBF120>, as analysts welcomed the pensions deal.

"Crucially, this removes AF-KLM's exposure to future deficit payments for these schemes," analysts at brokerage Liberum wrote, although they kept a "sell" rating on Air France KLM shares.

Air France KLM shares have jump by around 150 percent since the start of 2017, helped by progress on cost cuts and an upbeat outlook on ticket prices.

($1 = 0.8499 euros)

(Reporting by Sudip Kar-Gupta; additional reporting by Blandine Henault; editing by David Goodman and Jason Neely)